The Use and Management of Federal Coal

The United States has more coal than any other nation on earth, with the federal government owning about one-third of all U.S. coal reserves. Due to such a significant amount of public ownership, particularly in western states, standard ways of economic thinking often do not apply in the case of federal coal.

In The Use and Management of Federal Coal, Robert H. Nelson tells the important but largely untold story of the U.S. coal program and its place in the country’s larger energy system. In the process, Nelson reviews the traditional economic methods that have gone into the calculation of fair market value and other important influences on the amount of coal leased by the federal government. He concludes that the current circumstances surrounding federal coal require new economic understandings that have thus far eluded policymakers and many policy analysts.

A particular problem is the effective monopoly of federal coal ownership in the Powder River Basin of Wyoming—a fact that persists while policymakers and other analysts have applied standard methods of analysis suitable for more conventional market settings. Nelson concludes that for federal coal, demand-side actions to reduce coal consumption are much preferred to emerging supply-side efforts to “keep it in the ground.”

Today, the federal coal program is once again in the national spotlight, and with a new presidential administration, this PERC study makes an important contribution by providing historical background and an up-to-date economic discussion of the federal coal program based on Nelson’s nearly 40 years of experience in federal coal policy. Nelson’s analysis will be of interest to anyone interested in the past or future of coal in the United States.

Reviews

Robert Nelson was ‘Mr. Coal’ during his years on the Economic Staff in the Office of the Secretary of the Interior where he had a major influence on the design of the federal coal leasing program and on the report of the Linowes Commission. His penetrating analysis of the current issues in federal coal leasing could set a new course for an old program.—Robert K. Davis
Former Head of Economics Staff, Office of the Secretary of the Interior

Nelson’s expertise and insight into federal coal policy show on every page of this report. All who aspire to reform federal coal policy would be well advised to read this short history and absorb Nelson’s analysis.—Michael Giberson
Energy Economics and Law, Rawls College of Business, Texas Tech University

As Professor Nelson’s colleague for many years in the U.S. Department of the Interior, I was honored to work with this brilliant man. We are all fortunate that he has turned his attention once again to the federal coal program. Nelson’s historical review and in-depth examination of the status of this program are fascinating, and his conclusions should be held in the highest regard.—Donald Bieniewicz
Former Senior Analyst, Office of the Secretary of the Interior

Robert H. Nelson is a professor of public policy at the University of Maryland and a 2010 Lone Mountain Fellow at PERC. From 1975 to 1993, he worked as a senior economist in the Office of Policy Analysis of the Office of the Secretary of the Interior.